Credit card use can be beneficial to your finances if managed appropriately. Learning to balance credit card use with spending habits while also saving can positively impact your finances over time. Credit card use often helps increase one's credit score if the balances are paid in full each month and on time. However, mismanaging credit or carrying balances over time can lower credit scores and be a risk to your financial future since lenders use credit scores to assess creditworthiness on loans.

Credit card debt occurs when people lack the financial resources to pay off their credit cards. Perhaps the credit cards were used for emergencies or used for a large purchase that they intended to pay off right away but were unable to due to a financial change. Or, it may be an indication of spending beyond financial means.

Paying off credit card debt is possible for everyone. But often, people may feel deprived that all of their extra finances are going toward credit card debt reduction leaving little leftover for other things. The important thing is not to deprive yourself during your debt reduction to continue to make progress. Here are a few ideas to help you feel empowered by improving your financial situation as you work toward reducing your credit card debt:

Reward yourself with the little things- Buying a latte once a week isn't going to hinder your debt-reduction plan. If it brings you happiness about your progress, enjoy it!

Get rid of the extras- Have something you're paying for and not using? Cancel it, return it, or reduce it to free up extra money to use toward reducing credit card debt or cushioning an emergency fund or checking account. Maybe a membership isn't being used, or a clothing item with the tags still on needs to be returned?

Make a deal- Nice things don't always have to be high priced so try negotiating for what you want. Autos, furniture, and even clothing prices at small retailers can be negotiated and save you money. Also, don't forget to negotiate a lower interest rate from your credit card company!

Experian explains a few methods for reducing credit card debt:

• Debt Avalanche: Start by paying off the credit card with the highest annual percentage rate first while paying minimum payments on the rest. Use your extra money to make aggressive payments and once paid off, move to the next highest interest rate card and apply both the minimum and extra each month.
• Debt snowball: Pay off the credit card with the smallest balance first. Focus all the additional money toward debt reduction while paying minimum payments on the rest. This method focuses on paying off one card first, then moving to the lowest balance card.
• Debt consolidation: Pay down high-interest rate credit cards by consolidating them into a lower-interest rate credit card or personal loan.

As you work toward managing your credit card debt, start with these simple tips:

• Order your credit report through a free reporting online option. Per Federal law, you can receive one free report per year. Check your information for errors and contact the reporting agency to correct them.
• Pay off your highest interest rate credit card as quickly as possible. Once the highest interest rate card is paid, focus additional payments towards the other cards starting in order of the highest interest rate.
• Check your credit card statements for errors and late payment posts. Contact the credit card company and request a reversal of late payments if you can prove their errors.
• Use your credit card to your advantage by using and paying it off each month to build your credit history.
• Shop for better interest rates for your credit cards. If you anticipate carrying credit card debt for more than a year, consider transferring balances to a lower interest rate credit card.

Remember that paying off credit card debt is essential to your financial future. Review our financial wellness checklist to get clear strategies that can help you manage your credit and your finances this year. Access the checklist here.

Important Disclosures
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.
This article was prepared by Fresh Finance.
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